Telekom to face irate shareholders in court

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Deutsche Telekom will be in the dock from Monday in a case already rewriting German legal history, brought on behalf of 16,000 shareholders who feel cheated by the former public phone company.

More than 800 law firms are representing plaintiffs reportedly claiming to have suffered a collective loss of €100 million euros ($157 million) because the company was overvalued at the time of its 2000 listing.

The participants and the potentially huge public audience were not expected to fit into a courtroom and therefore the Frankfurt high court will be sitting in a conference centre in southwestern Germany.

In addition to the venue, the law has also been changed to cope with the unprecedented case.

Since the German legal system did not allow US-style class-action suits in which a single plaintiff sues on behalf of numerous others, each of Deutsche Telekom's accusers would have had to act on his own.

Faced with the prospect of thousands of individual claims, lawmakers in 2005 created a similar mechanism that is now being used for the first time -- and sometimes referred to as "Lex Telekom."

The main argument is simple -- the company is accused of inflating the value of its real estate holdings and misleading potential shareholders.

Deutsche Telekom vigorously denies any wrongdoing and has said the case will serve to confirm that the listing process was beyond reproach and clear the company of any suspicion.

In 2000, it listed a third slice of its capital at a price of €66.5 per share.

Demand far exceeded supply. One of the plaintiffs, a pensioner from southwest Germany, bought shares for more than a million euros. And like millions of others he saw his investment evaporate when, in February 2001, Deutsche Telekom was forced to announce a drastic write-down of its real estate portfolio value, causing share prices to plunge.

There are expected to be 17 court hearings between Monday and the end of May. But the case could carry on for years and a second of its kind is in the pipeline as hundreds of shareholders prepare to sue over alleged irregularities in the listing of Deutsche Telekom capital in 1999.